Canadian Money Forum banner

1 - 13 of 13 Posts

·
Registered
Joined
·
229 Posts
Discussion Starter #1
I am wondering if I own a place and i live there, hence it's my princinpal residence and I have 1-2 extra rooms that I want to rent out:

- Would I need to get some kind of permit to do so?
- Does it considered to be a rental property then?
- Is there a limit at how many renters you can have that will make a difference between principal residence / rental property?


Thanks in advance!
 

·
Registered
Joined
·
3,197 Posts
I think you are confusing the Income Tax Act definition of "Principal Residence" with Provincial and Municipal zoning and land-use laws.

- Would I need to get some kind of permit to do so?

Depends on province and municipality, and also the nature of the rental space - is it just a bedroom in your house, or a separate suite? But quite possibly yes.

- Does it considered to be a rental property then?

Unless you can legally and practically convert your house to a multi-unit apartment building, it is still your principal residence. But any rental income is still income you have to declare. Read CRA's publication T4036 - Rental Income. The fact that you live there affects what you can claim as expenses.

- Is there a limit at how many renters you can have that will make a difference between principal residence / rental property?

This would be a zoning & bylaw issue, not income tax. (ie. can you legally turn your single-family dwelling into a rooming house?) It is still your principal residence. But the amount of space you rent out affects the propertion of costs you can claim as rental expense.
 

·
Registered
Joined
·
229 Posts
Discussion Starter #3
Thanks for the reply

it will be in Toronto and when (and if) I get a house, I wont purposely change the house just to rent it out (ie. I wont do major renovation and turn the house into a big student housing type), I would keep it the way it is and rent out the empty rooms that are available.
 

·
Banned
Joined
·
419 Posts
You also don't have to claim some rental income. I read this on crA's website but am unable to locate it. They even had a number. Basically your "friend" stays at your plac e for no charge, but kicks in to help out with cable, etc.
I couldn't belive CRA had it up online. Will post when I find.
 

·
Registered
Joined
·
5,464 Posts
Here's the circular (I've posted it here before, but don't know how to link to archived posts).

The info bean is referring to is on page 16, under the title "Renting Below Market Value."

Be very aware that the examples CRA gives in this section are of relatives sharing space with a relative.

If audited, you would need to prove that you shared a portion of current household expenses only (i.e., utilities) - not mortgage expenses; and you would need to demonstrate that you charged less than fair market value.
 

·
Registered
Joined
·
3,197 Posts
There is a paragraph in T4036 that says:
Renting below fair market value
You can deduct your expenses only if you incur them to earn income. In certain cases, you may ask your son or daughter, or another relative living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries. You do not report this amount in your income, and you cannot claim rental expenses. This is, in fact, a cost-sharing arrangement, so you cannot claim a rental loss.

If you lose money because you are renting a property to a relative for a lower rate than you would rent it to other tenants, you cannot claim a rental loss. When your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because your rental operation is not considered to be a source of income. However, you can claim a rental loss if you are renting the property to a relative for the same rate as you would charge other tenants and you reasonably expect to make a profit.


That's probably the exception you are looking for. Although their examples are for relatives, if you had the same arrangement for non-relatives, I suspect it would still pass, because you are not renting in expectation of a profit. I suspect their thinking is that, if you added up all the operating costs you would allowed to deduct from the rental income, and it exceeds what you are charging in rent, then you have no net profit on which to be taxed anyway, so why make you declare the income?

PS. Sorry for the double post - Moneygal beat me to the punch while I was composing. She also confirms what I thought, that you would not be able to recover "ownership" costs this way.
 

·
Registered
Joined
·
229 Posts
Discussion Starter #7
Thanks a lot for the reply guys !

I am still wondering about the permit part - if let say there are 3 rooms in the house, I'll be using one of them obviously, and I'll be renting out the other 2 rooms - would I need to apply for some kind of permit to the city of Toronto?

Thanks again!
 

·
Registered
Joined
·
12,774 Posts
Honestly, 30 seconds of googling, but here you go:

http://www.toronto.ca/licensing/rooming_houses.htm

Chapter 285 - Rooming Houses

Chapter 285 Rooming Houses, Toronto Municipal Code, provides a definition for the term and compliance standards for property owners to meet. The chapter defines a rooming house as:

A building that contains dwelling rooms and may also contain one (1) or more dwelling units, where:
-The dwelling rooms, in total, are used or designated or intended for use as living accommodation by more than three (3) persons; and
-The living accommodation is provided in exchange for remuneration.

The Rooming House Chapter states that no person shall use, permit to be used, rent or offer to rent any rooming house unless a rooming house licence is in force. The Chapter also states that no person shall use a licenced rooming house except for any purpose for which the licence was issued.

The administration and enforcement of Chapter 285, in the former City of Toronto, falls under the jurisdiction of the Municipal Licensing & Standards Division.

The Investigation Services team enforces the provisions of Chapter 285 with respect to the issuance, suspension, renewal or revocation of a rooming house licence. This includes the imposition of conditions on the licence as the circumstances require.

Rooming houses are only legal in the former City of Toronto. In the former City of Etobicoke, there are licensed lodging houses which are licensed by Toronto Public Health. In the former Cities of North York and Scarborough, rooming houses are illegal.

If you believe that there is an illegal rooming house in your neighbourhood, please contact your District Office and an Officer will investigate the complaint.
So, unless you plan on owning in the old city of Toronto or having two or fewer tenants besides yourself, then it looks like you might be out of luck.
 

·
Registered
Joined
·
3,197 Posts
I would suggest poster contact the City for clarification, From above definiiton it's not clear if the "more than 3 persons" applies only to the roomers or to the roomers + the owner (s). But from the way it's written I think it's just the roomers. So if he is only renting out 2 single rooms there may be no problem.
 

·
Registered
Joined
·
229 Posts
Discussion Starter #10
Thanks all for the help!

I will definitely be clearing it up with through the respective official channels when the time comes. Right now I am just gathering as much as information as possible from every angle in the "grand plan" of buying my first place :)
 

·
Registered
Joined
·
2,054 Posts
I'm sorry curious reader but "roomers" tend to be the worst sort of tenants. There is high turnover and the people are pretty low quality.

This is the highest PITA factor rental you can do. I know people who have done it and it is of course the highest paying kind of renting you can do but still..... not for the faint of heart.
 

·
Banned
Joined
·
1,241 Posts
We (husband and I) have rented out a room or two for years now and have had very few issues. We rent out to Uni students mostly, although we have had a few young people visiting on a work permit from various countries. I find the Uni students are here to study and give no/little problems, and people from other countries (that we have rented to) aren't here to cause problems.

I highly recommend renting out a room or two to offset your mortgage or other costs.
 

·
Registered
Joined
·
514 Posts
make sure you talk to an accountant as well. for in home business use i know that if more than 50% of the home is claimed you can lose your primary residence capital gains exemption.

if you need to rent the rooms in order to afford the house, maybe now is not the best time to buy. there are times when renting is financially better, and I would think right now is one of them...
 
1 - 13 of 13 Posts
Top